Current legislation only applies to the proceeds of drug-related crime, but, if approved by Euro MPs, the new law would oblige financial institutions, Bureaux de Change, credit houses and anyone dealing with client's finances to tell authorities if they suspect proceeds have come from terrorist activity.

CNN's Paula Hancocks said: "This new law now has to go to the Eruopean Parliament, probably tomorrow, in Strasbourg, where it will be voted on."

The decision came as senior European Union ministers met to review its counter-terrorism measures -- from airline security to civil protection against biological and chemical warfare.

Ministers with responsibility for foreign policy, diplomacy, police and judicial affairs, air transport, humanitarian aid and economic and financial strategy in the 15-member states are gathering in Luxembourg on Tuesday and Wednesday.

They will assess a range of measures already agreed since the September 11 terror attacks in the U.S., and check for any loopholes in the law which need to be blocked.

At the finance meeting, UK Chancellor Gordon Brown called for a worldwide campaign to cut off the "financial lifeblood" of terrorism.

Nothing short of a global effort to root out secret banking which funded terrorism would do in the wake of the attacks on the United States, he said.

"Economic crime units" should be established to trace "underground banking", he said, adding that nations which had not yet ratified the U.N. Convention for the Suppression of Terrorist Financing should do so within weeks.

All this week's meetings pave the way for a summit of EU leaders in Ghent, Belgium, on Friday.

In a statement in advance of Tuesday's talks, the European Commission said: "The EU intends to continue to build on these measures, guided by the values of solidarity, security and steadfast determination in the fight against terrorism."

The EC vowed to maintain solidarity with the U.S. and the civilian population of Afghanistan. It also aims to strengthen security in air travel and improve EU links with the U.S. and other non-EU countries to boost police links and strengthen the current diplomatic drive to maintain a broad coalition against terrorism.

Transport ministers will be endorsing EC proposals put forward last week allowing limited cash support from national governments for EU airlines hit by the drastic drop in passengers in the wake of the terror attacks.

And they will back moves to improve cabin crew training against terrorism and step up checks on passengers and luggage.

Last week, Europe's largest airlines -- Air France, British Airways, Lufthansa, Alitalia and Iberia -- lobbied the EC for aid beyond a limited package of measures announced a week earlier.

EU Transport Commissioner Loyola de Palacio is offering to relax an EU ban on state subsidies to allow governments to compensate airlines for the four days lost when all flights to the U.S. were grounded after the attacks.

The airlines want more compensation and extension of government guarantees to cover increased costs of security and insurance.

The EU has offered to extend the government cover until December 31.

Finally, Home Office ministers will be pushing for agreement by December on an EU-wide arrest warrant to replace the current laborious system of extradition between member states.

They will also give their support to a major new boost for police and judicial authorities throughout the EU.

Moves under way include joint investigation teams of police and magistrates, routine exchange of information about terrorism between the member states and Europol, the Hague-based intelligence gathering operation recently set up by the union.

A specialist anti-terrorist team within Europol, much closer co-operation on counter-terrorism between Europol and U.S. authorities and a common list of terrorist organisations are also moves being speeded into place by the EU.

The meeting will also discuss a single, pan-EU definition of terrorism. Only France, Germany, Italy, Britain, Portugal and Spain now have terrorism laws.